Before the year began, the following static budget was developed for the estimated sales of 100,000. Sales are sluggish and management needs to revise its budget. Use this information to prepare a flexible budget for 80,000 and 90,000 units of sales.
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Before the year began, the following static budget was developed for the estimated sales of 100,000. Sales are sluggish and management needs to revise its budget. Use this information to prepare a flexible budget for 80,000 and 90,000 units of sales.
| Flexible Budget | |||
| 100,000 | 80,000 | 90,000 | |
| Sales | $3,580,000 | $fill in the blank 1 | $fill in the blank 2 |
| Cost of Goods Sold | |||
| Direct Material | $900,000 | $fill in the blank 3 | $fill in the blank 4 |
| Direct Labor | 1,100,000 | fill in the blank 5 | fill in the blank 6 |
| Variable Manufacturing |
240,000 | fill in the blank 7 | fill in the blank 8 |
| Fixed Manufacturing Overhead | 70,000 | fill in the blank 9 | fill in the blank 10 |
| Cost of Goods Sold | $2,310,000 | $fill in the blank 11 | $fill in the blank 12 |
| Gross Profit | $1,270,000 | $fill in the blank 13 | $fill in the blank 14 |
| Variable Sales and Administrative Expenses | 100,000 | fill in the blank 15 | fill in the blank 16 |
| Fixed Sales and Administrative Expenses | 940,000 | fill in the blank 17 | fill in the blank 18 |
| Income Before Taxes | $230,000 | $fill in the blank 19 | $fill in the blank 20 |
| Taxes | 69,000 | fill in the blank 21 | fill in the blank 22 |
| Net Income/Loss | $161,000 | $fill in the blank 23 | $fill in the blank 24 |
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